This was the clearest version of a unanimous
solution among five panelists at PLANSPONSOR magazine’s
Plan Designs 2006 conference in Chicago this week.

Each of the panelists provided their assessments of
the generation, whose members have not reached 30, with
their conclusions resembling a virtual Venn
diagram.

The logic: This next generation of retirees is
debt-ridden and will live and work longer then those
before it. They are not taking hold of their retirement
futures, and in many cases, not even considering it. This
is a generation bombarded with options about how to spend
their money. And employers must embrace that these “Echo
Boomers,” or “Millennials” have a different behavior
about retirement that begs an alternative approach to
prepare them.

“The mindset of Generation Y is that not only is
retirement not on the radar, but they do not even think
it needs to be,” said Lori Lucas, Director of Participant
Behavior Research at Hewitt Associates, one of the
panelists at the conference.

Lucas said Hewitt’s own research found this
generation is already showing signs of indifference
toward retirement. A little more than one third (35.9%)
of Generation Y is funneling money into 401(k) plans when
employers offer them, compared to 65.6% of Generation X
and 74.1% of Baby Boomers.

The median 401(k) balance of this generation is
$1,570 – a figure that Lucas says belies this group’s
confidence that they will be ready for retirement. “The
challenge will be to get Gen Y to use DC plans, if they
will use them at all.”

Lucas said that behavioral shifts for this
generation toward savings have stalled their concern
about retirement and have fostered the position that this
generation is different from previous generations. She
said the stigma of bankruptcy has disappeared, removing
the consequence of spending.

This attitude fosters a mindset that “spending
wildly is a virtue,” and “frugality, a vice,” said
Lucas.

This calls for a difference approach to making them
think about retirement – one that keeps their gravitation
toward instant gratification. The 401(k) match allows
this generation of workers to see money in the 401(k)
plans ballooning, whereas Baby Boomers waited until
retirement, said Catherine Collinson, Senior Vice
President of Strategic Planning at Transamerica
Retirement Services and one of the five panelists.

Collinson added that Generation Y has become a
“debt generation” created by the onslaught of credit card
access and not enough knowledge of retirement. She
suggests an industry-wide effort to “get financial
literacy in high schools and colleges.”

“Peoples’ feelings on retirement are based on the
people that are already living retirement. So until the
upcoming generation of retirees sees the current one’s
eating dog food, they are not going to worry,” Perlman
said.

Perlman said that digging this generation out of
careless retirement will require education that makes
them understand the immediacy of a danger that seems so
distant.

“They don’t realize the realities of retirement or
how long it will last,” Perlman said.

Another barrier that Generation Y must overcome,
which was not present before, is that the real wages have
declined, said panelist Tom Swain, FSE, Principal at
Wells Fargo Benefits Consulting. He said credit card debt
is not unique to this generation, but a big question is
whether they will be able to maintain the same standard
of living as previous retiring generations.

The definition of retirement is also changing. It
is no longer considered an abrupt stopping point, but
more of a process. Even Baby Boomers have embraced this
“new retirement,” or phased retirement, in which people
continue working even after the retirement age, according
to Stephen Mitchell, Director of Merrill Lynch Retirement
Group.